European Business News (EBN), 96-10-14

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From: The European Business News Server at <http://www.ebn.co.uk/>

Page last updated 0810 October 14 CET

CONTENTS

[01] Finland joins the European Monetary Systems' exchange-ratemechanism

[02] Eurotunnel reorganises its management and names new bank advisers

[03] Air France is reportedly in alliance talks with Continental Airlines of theU.S.

[04] Cordiant plans public offering of Siegel & Gale unit

[05] Far-right Freedom Party makes large gains in Austrian elections

[01] Finland joins the European Monetary Systems' exchange-ratemechanism

The decision is widely seen as a boost for the prospects of a single European currency and for increased monetary stability on the continent. By entering the ERM, Finland's coalition government said it wanted to 'guarantee that Finland will fulfil all the convergence criteria' for economic and monetary union.

Currency stability is an EMU criterion and several countries argue that the EU's Maastricht treaty requires ERM membership in order to qualify for the single currency.

The ERM, which limits fluctuations between participating currencies, will now group 11 of the EU's 15 currencies. Italy, Britain, Sweden and Greece remain outside.

The spotlight now turns to the Italian lira, which was forced out of the grid after a currency crisis in 1992. Italy is keen to bring the lira back to bolster its chances of joining a single currency.

The decision underlined the strong recovery and increased stability of the Finnish economy, which suffered a deep crisis in the early 1990s following the collapse of the Soviet Union, an important export market.

Finland now seems well placed to meet the other EMU criteria on government debt and borrowing, inflation and interest rates. The markka will be allowed to fluctuate by up to 15% against the other ERM currencies, the normal margins since the bands were widened in August 1993 to deter currency speculation. The currency joins the currency grid today at a central rate of 3.04 to the Deutschemark.

In Stockholm, the Swedish central bank said Finland's ERM membership would not affect Sweden's position that it did not have to join the grid to qualify for the new single currency. The two Nordic nations, which both joined the EU in January last year, are major trading partners as well as fierce competitors on world markets in pulp and paper.

Their currencies had been floating since Europe's currency turmoil in late 1992.

[02] Eurotunnel reorganises its management and names new bank advisers

It also said it had appointed Kleinwort Benson and Credit Commercial de France as its British and French bank advisers. The channel-tunnel operator said Kleinwort would continue to help the company in London and Paris with the completion of its debt restructuring deal with creditor banks.

The group said the decisions were taken at its first board meeting since the announcement of its debt restructuring deal at the start of last week.

It said it was creating a client division with a ‘Le Shuttle'unit and another unit for ‘rail relations.'

[03] Air France is reportedly in alliance talks with Continental Airlines of theU.S.

The newspaper quoted Continental chairman Gordon Bethune as telling U.S. trade publication Aviation Daily that the talks were in their final stages but that no deal had been signed yet. Les Echos said that Air France declined to comment on the talks.

The paper said industry sources indicated that the French airline was talking to more than one airline about alliances, trying to find a good geographical spread to counter other airline alliances.

Les Echos said Air France talked to both Continental and USAir in the past few months. Air France and Continental signed a commercial accord back in 1993 but it has never been implemented due to changes in top management at both companies.

The paper added that the U.S. aviation authorities were squaring up for another power struggle with France over 'open skies' and were preparing to refuse their authorisation of Air France's winter timetable and would also use any alliance deal as a lever to push the French to further open up the domestic market.

[04] Cordiant plans public offering of Siegel & Gale unit

According to the Wall Street Journal, Cordiant would make the offering in New York and would retain a controlling stake in the unit. Other details couldn't be determined.

A spokesman for Cordiant, the parent of Saatchi & Saatchi refused to comment on the plans but said any ‘corporate move involving Siegel & Gale...would in no way see Cordiant's commitment to Siegel & Gale and its future reduced.' The spokesman added that Cordiant doesn't intend to dispose of ‘any of its subsidiaries and is fully committed to developing Siegel & Gale's potential to the maximum...by whatever is considered the best means.'

Cordiant's plans for the public offering are the latest sign that Madison Avenue is still scrambling to catch up with a gaggle of small start-up agencies specialising in on-line marketing.

Many of these smaller firms have proved more adept than the big agencies in snaring assignments from blue-chip clients to develop on-line marketing activities.

[05] Far-right Freedom Party makes large gains in Austrian elections

Xenophobic populist Joerg Haider and his right-wing party pulled level with traditional leftist and conservative parties who have tried for the past decade to ignore his rise. The Social Democrats, long Austria's leading party, suffered heavy losses in the nationwide vote for the 626-seat European parliament and also lost their majority in Vienna for the first time since World War II.

Although all European governments have fared poorly in European polls, Haider's stunning success will send negative signals to Austria's 15 partners in the European Union, two years after 66 percent of Austrians voted to join the EU.

Haider's Freedom Party is shunned by all mainstream parties on the continent. An effective, folksy orator, Haider shocked many last year when he lauded veterans of Adolf Hitler's Waffen-SS as decent people. Haider's party also triumphed in two local by-elections, gaining one more seat in the 183-member national parliament for a total of 42.

Results showed Haider's Freedom Party with 27.62% in the European ballot, up 5.62% from national parliamentary elections last December.

The Social Democrats crashed to a projected 29.18% - 8.9% down on last year. Their junior partners in national government, the conservative Austrian People's Party, had 29.6 percent, 1.3% up on last December.

Election officials said that gave the conservatives seven seats in the European parliament, and the Social Democrats and Freedom Party six each. The Greens and Liberal Forum got one each. At 67.2%, voter turnout was well below that of national elections, but better than in many other EU member countries. The losses by the governing Social Democrats could have serious repercussions domestically.

But Social Democratic Chancellor Franz Vranitzky, whose popularity has been dented this year by austerity measures, insisted the European elections would have no bearing on his government. But given the results of Sunday's voting, Vranitzky could come under pressure to resign.

The national government and Vranitzky have come under fire for a two-year austerity package and for allowing the takeover by foreigners of some well- known companies. Haider has gained strength on calls for law and order and anti-foreigner policies. But he has also criticised fat paychecks for officials in power.

From the European Business News (EBN) Server at http://www.ebn.co.uk/

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