Week in review (11 January)

Regional politics continue to prevent decisive intervention in failing banks

Amid calls earlier this week for the nationalisation of Carige from the leaders of both M5S and Lega, the ECB continues to move the bank towards a merger. The ECB appointed administrators have tasked UBS to sound out prospective buyers for the bank, with the possibility that UBS may itself consider making the purchase – provided there are certain state guarantees. Of the other Italian banks, Unicredit and MPS have been touted as potential buyers. In the absence of any decisive intervention, it may well be the case that the bank will have to reach the point of resolution before a buyer is found, similar to the Intesa acquisition of Banca Popolare di Vicenza and Veneto Banca. It is worth recalling that the Carige board rejected a €550 million all cash offer for the bank in 2016.

Meanwhile, German Landesbanken have fared little better than Italian banks since the financial crisis. Nord LB needs a capital injection of around €3.5 billion due to shipping losses and Commerzbank and Helaba have withdrawn from merger talks – the preferred solution of the ECB. Nord LB is a prime candidate for resolution but given the State of Lower Saxony’s 59% shareholding and its ties to local savings banks (35% shareholding), this course appears highly unlikely. Negotiations with Cerberus and Centerbridge will intensify in the coming months in order to come up with a private sector solution, thereby avoiding violating state aid rules.

Rare boost for Google ahead of another challenging year

After a difficult number of years dealing with European courts and regulatory, Thursday 10 January brought some rare good news for Google when the ECJ Advocate General sided with the company – rejecting the French data protection authority argument that Europe’s ‘right to be forgotten’ rule should apply not only in the European Union but also globally.

Nevertheless, the company remains under considerable regulatory pressure and is currently the subject of 280 cross border complaints to data protection authorities across Europe. Its profitability is also threatened by a proposed copyright directive which ensures fair remuneration for content creators. Agreement is expected on this by 21 January. The company may also be the subject of a fourth antitrust investigation, following an October questionnaire sent by DG Comp which asked rivals if Google unfairly demotes local search competitors.

Tsipras outlines potential path towards early elections

Ahead of today’s scheduled meeting with outgoing coalition partner and ANEL leader Panos Kammenos, which was subsequently postponed Alexis Tsipras has indicated that he will call a vote of confidence in his government should Kammenos withdraw his support as a result of the Prespes agreement, which aims to put an end to the long running dispute on the name of Macedonia.

Although Tsipras only needs 120 votes to remain in office, in reality 151 votes are required to govern. Tsipras has acknowledged this by indicating that he will call snap elections should he fail to secure 151 votes. Should this scenario materalise, it does not change our view that elections are unlikely to take place before May. Tsipras has indicated that elections would only take place after the government has completed significant legislative work, including the passage of the Prespes agreement.