European Business News (EBN), 96-11-01

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

Page last updated November 1 1400 CET

CONTENTS

[01] Britain and Germany angry over French pensions aiding EMU criteria

[02] Russia's Gazprom plans to issue Eurobond

[03] Switzerland's Swiss Re half year profits rise 54%

[04] Chancellor Kohl reinforces commitment to EMU

[05] UK manufacturing index at 18-Month High

[06] S. Korea's Samsung in agreement to buy Dutch Fokker

[07] Bank of Tokyo-Mitsubishi raises its profit forecast by 60%

[08] BSkyB posts 31% rise in pretax profit

[09] Waigel says there will be no increases in the German tax burden

[10] GM and Suzuki exploring small car development in Europe

[01] Britain and Germany angry over French pensions aiding EMU criteria

Brussels yesterday gave the go ahead for France to use 37.5 billion francs - that's just under 7 billion dollars - of France Telecom pension fund transfers to cut it's deficit to three per cent of GDP by 1997.

The move's being seen in the financial markets as further evidence that political pressure and not economic reality will ensure monetary union.

French Finance Minister Jean Arthuis is reported delighted at the decision, however a senior Bundesbank official described it as ‘wrong'.

Germany, Britain and the Netherlands have all questioned the legality of the proposal. The European Commission's statistical wing, Eurostat, which recommended the go-ahead, is to hold an emergency meeting on Monday to formulate a response to the growing criticism.

[02] Russia's Gazprom plans to issue Eurobond

The gas giant hopes to raise between $250 million and $500 million through the issue, and it could pave the way for other Russian companies to raise money abroad.

The Eurobond issue comes despite worries over President Yeltsin's health, and a collapse of talks with the International Monetary Fund over the governments $10.2 billion budget support loan.

[03] Switzerland's Swiss Re half year profits rise 54%

In its annual report, released Friday, the group said it expects again a substantially higher result in 1996, provided there won't be any major damages from natural disasters or seriously negative developments on capital markets. Return on equity was 12.7% in 1995, up from 8.7% a year earlier. 'We have thus taken another important step towards reaching our medium term goal of achieving a return on equity of 15%,' Swiss Re said.

[04] Chancellor Kohl reinforces commitment to EMU

'We will achieve the Maastricht criteria, though that will not be easy,' Kohl told a news conference in Japan.

In reference to a report by the country's six leading economic institutes, which claimed that Germany would not meet the tough criteria for economic and monetary union (EMU), Kohl said: 'I think the forecast is wrong.'

But Kohl, Germany longest-serving chancellor this century, did admit the 1997 budget needed to be very carefully drafted and said some fundamental reforms were necessary.

However, the chancellor gave no details on how Germany will meet the EMU criteria, and also avoided comment on France's plan to use 37.5bn francs ($7.35 billion) in pension funds to cut its 1997 budget deficit. The plan, which has been accepted by the European Commission, has sparked concern that other European Union countries struggling to meet tough criteria for economic and monetary union would follow suit. Bundesbank-council member, Ernst Welteke, had already said that Germany was not satisfied with the moves so far made by France to meet convergence criteria.

'The new currency needs confidence. And if they do some tricks in the upcoming member states, it's not very good for the public. The public will not have enough confidence in the stability of the new currency,' he said.

Kohl, who arrived in Tokyo on Thursday on the last leg of an Asian tour, also spoke out on behalf of Deutsche Telekom's upcoming flotation.

'I will try to help so that also my friend, the Japanese prime minister, will buy Telekom shares in a few weeks. That will be a good investment,' said Kohl, after a meeting with Japanese premier Ryutaro Hashimoto.

A tranche of the 500m shares from Europe's largest ever sell off will be traded in Tokyo.

[05] UK manufacturing index at 18-Month High

In reaction to the data, a spokesman for the British Treasury said the October PMI 'is consistent with other business surveys' and 'confirms that manufacturing activity continues to strengthen.' The index is based on a weighted average of a wide variety of individual survey indexes including new orders, output, stocks of finished goods and prices. A reading above 50 indicates that the manufacturing economy is expanding while a reading below 50 indicates a general contraction. Members of the institute are responsible for spending 750 billion pounds of corporate money each year.

[06] S. Korea's Samsung in agreement to buy Dutch Fokker

Maeil Business Newspaper, one of two major business dailies published in South Korea, said in a front-page story that Samsung Aerospace plans to sign a formal contract soon after receiving approvals from the Korean government and the Dutch parliament. 'The Dutch government is asking Samsung Aerospace to make a long-term investment of between $500 million and $600 million in regard to the takeover of Fokker,' the paper quoted a high-ranking Samsung Aerospace official as saying. The official was also quoted as saying that a final agreement was being delayed and awaiting approval from the Dutch parliament and the Korean government. The paper said the takeover is valued at $150 million, and Samsung Aerospace plans to assemble Fokker-developed aircraft both in the Netherlands and in South Korea. '(We) agreed that Korea (Samsung) takes care of sales in Asia while Fokker handles those in other areas including Europe,' the paper quoted the official as saying.

A Samsung Aerospace spokesman, meanwhile, neither confirmed nor denied the report, saying the long-term investment figure seemed close. 'The (paper's) headline itself seems big news, but there have not been many developments lately,' the spokesman said. 'We just don't know when we will be able to make a final decision on the deal.'

[07] Bank of Tokyo-Mitsubishi raises its profit forecast by 60%

The bank said that its earnings will exceed prior expectations because the Japanese stock market at the end of September was stronger than it had anticipated. This means that the bank's appraisal losses after it marks its equity holdings to market value will be less than what it had previously foreseen.

Bank of Tokyo-Mitsubishi, the world's biggest bank, resulted from the April 1 merger of Mitsubishi Bank and Bank of Tokyo.

[08] BSkyB posts 31% rise in pretax profit

BSkyB said total subscribers reached 5.65 million, up 165,000 during the period.

BSkyB said cable subscription revenue, its biggest growth area, jumped 49% to 34.6 million pounds from the first quarter a year ago as the number of cable subscribers rose to 2.35 million. Direct-to-home subscriber revenue rose 22% to 194.2 million pounds as the number of subscribers hit 3.3 million.

It said satellite dish sales were slower and levels of subscriber disconnections increased at the beginning of the quarter by the European Football championships and the Olympic games, both shown on free-to-air television. Subscriber growth, BSKyB added, picked up in September, owing to demand for English soccer's Premier and Nationwide Leagues, to which the company has exclusive broadcast rights, as well as several new channels.

BSkyB stock is down 10 pence at 568 pence by in pre-opening trading on Friday.

[09] Waigel says there will be no increases in the German tax burden

Waigel reiterated to the Bild that in 1997 Germany won't overstep its goal for the government budget deficit of 56.5 billion Deutsche marks. He had also vehemently emphasized this in a speech before parliament Wednesday.

[10] GM and Suzuki exploring small car development in Europe

The accord marks the latest in the two carmakers' moves to enhance cooperative ties. Already in Canada, Suzuki and GM are turning out small vehicles in a joint venture to market them in the North American market. Suzuki is currently 3.2% owned by GM. The European joint undertaking is expected to help boost Suzuki's business operations in Europe and at the same time help GM bolster its competitiveness in Europe by making use of Suzuki's technology to develop small cars, industry analysts said.

The two car producers will launch a feasibility study soon, but a spokesman for Suzuki did not go into specifics about the car to be jointly developed. Suzuki's annual sales of motor vehicles in the European market, excluding Eastern Europe, have been running at about 120,000 units, half of which are produced in Hungary and Spain, with the other half exported from Japan. Suzuki plans to assemble in Europe cars it plans to develop jointly with GM. Suzuki and GM entered into a business tie-up in 1981. Since 1989, their joint venture company, CAMI Automotive Inc., has been producing the Cultus small car developed by Suzuki and the four-wheel-drive Escudo for sale in the North American market. In fiscal 1995 which ended last March, the joint venture's output reached 175,000 vehicles

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