Europe’s economy just isn’t getting anywhere. In the fourth quarter of 2009, the old continent grew only 0, 1% compared to the third quarter. Compared to the fourth quarter of 2008, the economy shrunk almost two percent. In Europe, France seems to be a rare exception showing an economic growth of 0, 7% in the last quarter on 2009... The Netherlands are just up to average with results that balance around the European mean. This year probably will not be any better.
If all goes well, the economy will grow a mediocre 1, 5% in 2010 and 2% in 2011, which is a far from satisfactory rebound after such a depression like crisis.
Europe’s Weakness
Europe’s bad economic performance is also reflected in the quarterly results of many European companies. According to Bloomberg 75 percent of all American companies did better than expected, but only few European corporations managed to meet expectations
European profits might not have been that bad, but revenues are stagnating or even declining. This means that many European companies are still busy streamlining (read: laying off people) their business.
A mediocre growth of 1, 5 to 2 percent is most likely to result in an ample labor market in the years to come. Randstad Human Resources has recently confirmed this. They do observe economic improvement, mostly in the United States though.
According to Statistics Netherlands (CBS), the only bright spot in the Dutch economy during the fourth quarter of 2009 was our export. Consumer demand was down and overall investments were disappointing. Most European corporations seem very reluctant to undertake any investments. This can be derived from, for instance, the annual and quarterly reports of Dell and Hewlett Packard, two world-wide operating companies. Both IT giants observe that demand in the United States and Asia has significantly risen while Europe is staying behind.
Dell remarked also that most of the demand comes from multinationals upgrading their ‘outdated IT infrastructure’. Mid- and small caps have not yet started this process.
It can be inferred that even American entrepreneurs still haven’t been convinced by the economic recovery and that credit facilities are not yet fully in place.
However, one can also conclude that 2010 will be a profitable year for Dell and Hewlett Packard. If the US economy gets more flesh on its bones and if Microsoft Windows 7 stands all tests the economy might grow surprisingly fast in the second part of the year.
Greek tragedy
Whether Europe will experience the same level of growth as the United States remains to be seen. In the first place, economic growth is traditionally lower in Europe. Secondly, the PIIGS countries pose a real threat to the economic recovery in Europe. Companies like the Swedish/Swiss ABB clearly doubt the power of the European economy. In 2010, this company will drastically cut back $ 3 billion instead of $ 2 billion. The company clearly doubts whether private investments will actually rise after all economic incentives will have ended. In order to beat its competitors, the company wants to lower its costs significantly.
But there is another problem. In order to join the European Union and enjoy the benefits of the Euro, Greece falsified its official statistics, which is a deadly sin. As a result, Greece was able to borrow money on the same terms as Germany. And borrowing it did. A lot and with a great deal of verve. The country now faces a deficit of 12, 7%.
For years, the ECB, the European Central Bank tolerated this and even lended Greece all the money it needed. All good things come to an end, and now the international financial markets are turning against this country. Greece has become the symbol of undisciplined financial and fiscal policies of many EU Member States. Greece itself does not cause a huge problem. The country represents less than 3% of the European GDP. The danger of infection is what really matters. After Greece, the financial market may turn against the other PIIGS countries and maybe even against Belgium and Austria. That can seriously damage the Euro.
Because it is unclear how the EU will combat the crisis, many investors are already getting rid of their Euros. It also affects the policies of the European Central Bank. The ECB will not be able to raise interest rates in the short run. The combination of higher European interest rates and strict austerity policies in the PIIGS countries will burden these countries only even more. But at the same time, the PIIGS countries are keeping the rest of the EU hostage.
The current crisis has shown the weaknesses of the monetary union. A monetary union cannot function without a political union, but that process is far from finished.
vrijdag 26 februari 2010
woensdag 17 februari 2010
Who is going to pick up the check?
According Mastiaux Frank, head of the Division Renewables of the German energy company E. on, wind energy, but also other forms of alternative energy, has finally outgrown the experimental phase and is now on the brink of industrial production. This is a good thing, because Europe is on the verge of massive and sustained investments in energy.
Political decision making
In the next decade, the European energy sector is expected to invest approximately EUR 1,000 billion. Where is all this money going to and why is it so much? The sector is facing a series of political agreements that date back to the first half of 2007. In the winter of 2006, European politicians had to face some unpleasant facts. Europe was vulnerable in its energy supply, because it depended on the good mood of the largest gas supplier, Russia. In Brussels, political leaders then decided that, by 2020, approximately 20% of the energy needed should consist of renewable energy. At the same time, politicians decided that in the same period CO2 emissions should decrease 20% from the base year 1990. This in itself is a challenge, but that's not all. Large parts of the current infrastructure are outdated and need renewal and modernization. Politics have set the agenda for the next ten years, but it is up to the private sectorto ’cough up the necessary green’. This same sector, however, is having a hard time because of the credit crisis. Demand has fallen and the funding is under pressure. The private sector of the five largest countries in the EU will have to invest EUR 80 billion annually over the next ten year, but for the current year the ticker stops at EUR 54 billion.
Doubting shareholders
After 2010 it seems things will brighten up a little, because the credit markets appear to be thawing/relaxing. Nevertheless, companies in the sector have to re-invest every euro earned into the company. And this is the reason why many shareholders are not so happy these days. They are questioning the extent of investment needed and doubting the feasibility of the targets. Their hesitation and doubts are understandable. If the sector wants to turn all these plans into reality, these utilities will account for one quarter of all capital investment of the whole private sector of Europe. The doubts of the investors are reflected in the development of the FTSE Europe Utilities Index. That is far short of the FTSE Europe Index. In their quest for capital, bankers are now knocking on the doors of Sovereign Wealth Funds from countries like China and Abu Dhabi, but they also address companies like Google, that have an interest in renewable energy
The consumer pays the bill
Yet it is questionable whether this way of working will eventually pay off. Critics see an important role for governments. Governments should vouch for long-term revenues, thus attracting pensions funds and other long-term investors. Some forms of guarantees and subsidies are already being offered. Governments, for example, have guaranteed prices of renewable electricity. The customer pays this form of subsidization in the form of a premium on their bills. There is a downside to this. Increased investments would mean increased subsidies, paid by the consumer. In the UK, consumers will face increases in their electricity bills of up to 60%. At the same time, these citizens are facing increased taxes and budget deficits. It is hard to convince the electorate of this. Your average citizen still feels enthusiasm for green energy, but it is hard to say at what cost. It will probably take a while until a new energy bill in the United States is passed. This means that Europe will not be able to share the costs of all investments with the Americans. Politicians may claim that their objectives remain intact, but the questions is whether the European citizen are willing to pick up the check.
Source:
The Financial Times, The power bill arrives. February 3, 2010
Political decision making
In the next decade, the European energy sector is expected to invest approximately EUR 1,000 billion. Where is all this money going to and why is it so much? The sector is facing a series of political agreements that date back to the first half of 2007. In the winter of 2006, European politicians had to face some unpleasant facts. Europe was vulnerable in its energy supply, because it depended on the good mood of the largest gas supplier, Russia. In Brussels, political leaders then decided that, by 2020, approximately 20% of the energy needed should consist of renewable energy. At the same time, politicians decided that in the same period CO2 emissions should decrease 20% from the base year 1990. This in itself is a challenge, but that's not all. Large parts of the current infrastructure are outdated and need renewal and modernization. Politics have set the agenda for the next ten years, but it is up to the private sectorto ’cough up the necessary green’. This same sector, however, is having a hard time because of the credit crisis. Demand has fallen and the funding is under pressure. The private sector of the five largest countries in the EU will have to invest EUR 80 billion annually over the next ten year, but for the current year the ticker stops at EUR 54 billion.
Doubting shareholders
After 2010 it seems things will brighten up a little, because the credit markets appear to be thawing/relaxing. Nevertheless, companies in the sector have to re-invest every euro earned into the company. And this is the reason why many shareholders are not so happy these days. They are questioning the extent of investment needed and doubting the feasibility of the targets. Their hesitation and doubts are understandable. If the sector wants to turn all these plans into reality, these utilities will account for one quarter of all capital investment of the whole private sector of Europe. The doubts of the investors are reflected in the development of the FTSE Europe Utilities Index. That is far short of the FTSE Europe Index. In their quest for capital, bankers are now knocking on the doors of Sovereign Wealth Funds from countries like China and Abu Dhabi, but they also address companies like Google, that have an interest in renewable energy
The consumer pays the bill
Yet it is questionable whether this way of working will eventually pay off. Critics see an important role for governments. Governments should vouch for long-term revenues, thus attracting pensions funds and other long-term investors. Some forms of guarantees and subsidies are already being offered. Governments, for example, have guaranteed prices of renewable electricity. The customer pays this form of subsidization in the form of a premium on their bills. There is a downside to this. Increased investments would mean increased subsidies, paid by the consumer. In the UK, consumers will face increases in their electricity bills of up to 60%. At the same time, these citizens are facing increased taxes and budget deficits. It is hard to convince the electorate of this. Your average citizen still feels enthusiasm for green energy, but it is hard to say at what cost. It will probably take a while until a new energy bill in the United States is passed. This means that Europe will not be able to share the costs of all investments with the Americans. Politicians may claim that their objectives remain intact, but the questions is whether the European citizen are willing to pick up the check.
Source:
The Financial Times, The power bill arrives. February 3, 2010
Who is going to pick up the check?
According Mastiaux Frank, head of the Division Renewables of the German energy company E. on, wind energy, but also other forms of alternative energy, has finally outgrown the experimental phase and is now on the brink of industrial production. This is a good thing, because Europe is on the verge of massive and sustained investments in energy.
Political decision making
In the next decade, the European energy sector is expected to invest approximately EUR 1,000 billion. Where is all this money going to and why is it so much? The sector is facing a series of political agreements that date back to the first half of 2007. In the winter of 2006, European politicians had to face some unpleasant facts. Europe was vulnerable in its energy supply, because it depended on the good mood of the largest gas supplier, Russia. In Brussels, political leaders then decided that, by 2020, approximately 20% of the energy needed should consist of renewable energy. At the same time, politicians decided that in the same period CO2 emissions should decrease 20% from the base year 1990. This in itself is a challenge, but that's not all. Large parts of the current infrastructure are outdated and need renewal and modernization. Politics have set the agenda for the next ten years, but it is up to the private sectorto ’cough up the necessary green’. This same sector, however, is having a hard time because of the credit crisis. Demand has fallen and the funding is under pressure. The private sector of the five largest countries in the EU will have to invest EUR 80 billion annually over the next ten year, but for the current year the ticker stops at EUR 54 billion.
Doubting shareholders
After 2010 it seems things will brighten up a little, because the credit markets appear to be thawing/relaxing. Nevertheless, companies in the sector have to re-invest every euro earned into the company. And this is the reason why many shareholders are not so happy these days. They are questioning the extent of investment needed and doubting the feasibility of the targets. Their hesitation and doubts are understandable. If the sector wants to turn all these plans into reality, these utilities will account for one quarter of all capital investment of the whole private sector of Europe. The doubts of the investors are reflected in the development of the FTSE Europe Utilities Index. That is far short of the FTSE Europe Index. In their quest for capital, bankers are now knocking on the doors of Sovereign Wealth Funds from countries like China and Abu Dhabi, but they also address companies like Google, that have an interest in renewable energy
The consumer pays the bill
Yet it is questionable whether this way of working will eventually pay off. Critics see an important role for governments. Governments should vouch for long-term revenues, thus attracting pensions funds and other long-term investors. Some forms of guarantees and subsidies are already being offered. Governments, for example, have guaranteed prices of renewable electricity. The customer pays this form of subsidization in the form of a premium on their bills. There is a downside to this. Increased investments would mean increased subsidies, paid by the consumer. In the UK, consumers will face increases in their electricity bills of up to 60%. At the same time, these citizens are facing increased taxes and budget deficits. It is hard to convince the electorate of this. Your average citizen still feels enthusiasm for green energy, but it is hard to say at what cost. It will probably take a while until a new energy bill in the United States is passed. This means that Europe will not be able to share the costs of all investments with the Americans. Politicians may claim that their objectives remain intact, but the questions is whether the European citizen are willing to pick up the check.
Source:
The Financial Times, The power bill arrives. February 3, 2010
Political decision making
In the next decade, the European energy sector is expected to invest approximately EUR 1,000 billion. Where is all this money going to and why is it so much? The sector is facing a series of political agreements that date back to the first half of 2007. In the winter of 2006, European politicians had to face some unpleasant facts. Europe was vulnerable in its energy supply, because it depended on the good mood of the largest gas supplier, Russia. In Brussels, political leaders then decided that, by 2020, approximately 20% of the energy needed should consist of renewable energy. At the same time, politicians decided that in the same period CO2 emissions should decrease 20% from the base year 1990. This in itself is a challenge, but that's not all. Large parts of the current infrastructure are outdated and need renewal and modernization. Politics have set the agenda for the next ten years, but it is up to the private sectorto ’cough up the necessary green’. This same sector, however, is having a hard time because of the credit crisis. Demand has fallen and the funding is under pressure. The private sector of the five largest countries in the EU will have to invest EUR 80 billion annually over the next ten year, but for the current year the ticker stops at EUR 54 billion.
Doubting shareholders
After 2010 it seems things will brighten up a little, because the credit markets appear to be thawing/relaxing. Nevertheless, companies in the sector have to re-invest every euro earned into the company. And this is the reason why many shareholders are not so happy these days. They are questioning the extent of investment needed and doubting the feasibility of the targets. Their hesitation and doubts are understandable. If the sector wants to turn all these plans into reality, these utilities will account for one quarter of all capital investment of the whole private sector of Europe. The doubts of the investors are reflected in the development of the FTSE Europe Utilities Index. That is far short of the FTSE Europe Index. In their quest for capital, bankers are now knocking on the doors of Sovereign Wealth Funds from countries like China and Abu Dhabi, but they also address companies like Google, that have an interest in renewable energy
The consumer pays the bill
Yet it is questionable whether this way of working will eventually pay off. Critics see an important role for governments. Governments should vouch for long-term revenues, thus attracting pensions funds and other long-term investors. Some forms of guarantees and subsidies are already being offered. Governments, for example, have guaranteed prices of renewable electricity. The customer pays this form of subsidization in the form of a premium on their bills. There is a downside to this. Increased investments would mean increased subsidies, paid by the consumer. In the UK, consumers will face increases in their electricity bills of up to 60%. At the same time, these citizens are facing increased taxes and budget deficits. It is hard to convince the electorate of this. Your average citizen still feels enthusiasm for green energy, but it is hard to say at what cost. It will probably take a while until a new energy bill in the United States is passed. This means that Europe will not be able to share the costs of all investments with the Americans. Politicians may claim that their objectives remain intact, but the questions is whether the European citizen are willing to pick up the check.
Source:
The Financial Times, The power bill arrives. February 3, 2010
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