European Business News (EBN), 96-11-22

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

Page last updated November 22 1715 CET

CONTENTS

[01] Ciampi says will reenter ERM by next weekend

[02] Thyssen, with net profits down 55%, cuts dividend

[03] ABN AMRO set to buy Standard Federal for $1.9 billion

[04] Kohl says as many as possible should join start of currency union

[05] SEC sues , alleging it concealed bribes

[06] Demand picks up for U.K. manufactured goods

[07] German producer and import prices gain in October

[08] to reorganise its businesses

[09] Skanska profit jumps 68%, bolstered by one-time gain

[01] Ciampi says will reenter ERM by next weekend

Following Ciampi's comments, a European Union official said the EU Monetary Committee is 'likely' to meet this weekend to discuss the possible return of the Italian lira to the ERM. The official cautioned, however, that the politically sensitive nature of the lira reentry issue means that a final decision on a meeting may not be taken until late Friday or early Saturday. He said discussions among E.U. officials are still underway.

Subsequently, Italian Prime Minister Romano Prodi announced that the lira will reenter the ERM within hours or days.

The comments follow days of speculation and confusion about whether the government would make a request for a European Union monetary committee meeting this month or by the end of the year.

In an earlier interview with Germany's Handelsblatt newspaper, Ciampi said that he had no doubts that, by rejoining the ERM, Italy would be able to satisfy a Maastricht criterion for entry into the planned European Monetary Union that requires currencies to trade within the ERM bands for two years.

In a speech to bankers in Frankfurt, Ciampi reaffirmed his country's commitment to be a founding member of European Monetary Union and as an element of stability, 'not of distortion'.

Ciampi said 'Italians are determined to do everything necessary to be an element of stability and not an element of tension or distortion'. He said the Italian government is committed to any measure, including the stability pact, to ensure a strong single currency.

Ciampi also said his government is committed to keeping the deficit to gross domestic product ratio below 3% in 1998 and beyond.

He rejected criticism about the one-off 12.5 trillion lire 'tax for Europe' that Italians will face in 1997 to meet a 3% deficit-to-GDP ratio required to be in the single European currency. 'This does not relieve government from its commitment to tough measures to bring the deficit below 3% in 1998, ' he said.

The task of containing the deficit under that level in the following years 'is not just credible but actually easier to achieve', given Italy's growing primary surplus, he said.

Ciampi said that Italian inflation expectations are changing. Inflation is being 'rooted out,' he said in the speech prepared for the conference. There is a 'reversal of thinking' of Italians regarding inflation. The historic 1993 labour accord has been a powerful means of bringing down inflation, he said.

Ciampi said inflation was now under control, noting that 'in November it had fallen to 2.6%, according to preliminary data'. He added that the government target for 1997 of an average 2.5% inflation rate was 'within reach'. The lira has been stable for many months at an average level of just 1,000 lire to the deutschemark, he noted.

This, coupled with lower interest rates, reflected the widespread conviction that Italy will be eligible to join the single currency in 1999, he said.

Stressing that only a unified Europe, where Italy can play a central role, would be able to face future world challenges, Ciampi concluded that 'Italy needs Europe, but Europe also needs Italy'.

[02] Thyssen, with net profits down 55%, cuts dividend

The dividend cut came on a 55% decrease in group net profit for the year. Group net profit fell to 350 million marks in the year ended September 30 from 775 million the year before. But Thyssen said it expects ''earnings to gradually improve and stabilize at least in the medium-term.''

Thyssen's supervisory board on Friday approved a 2.6 billion marks ($1.7 billion) investment programme emphasising core businesses. The company said that it would reorganize its industrial portfolio into five primary and an equal number of secondary profit centres.

[03] ABN AMRO set to buy Standard Federal for $1.9 billion

The deal is expected to be finalized by mid-1997, pending approval by Standard Federal shareholders and Dutch and U.S.authorities.

'On the basis of the expected 1997 profit of Standard Federal Bancorp. the takeover will - once realized - contribute several tens of guilder cents to ABN AMRO's earnings per share.' said ABN AMRO Managing Board Chairman Jan Kalff. Kalff added that ABN AMRO will issue dlrs 750 million of preference shares in the United States to finance the takeover. Standard Federal has 182 branches in the Detroit area as well as in Illinois, Ohio and Indiana.

With total assets of dlrs 68 billion and 11,000 employees, ABN AMRO says it is the largest foreign bank in the United States. Standard Federal has some 4,000 staff and about one million clients to which it sells mainly savings products and residential mortgages. At the end of October 1996, Standard Federal's total assets amounted to dlrs 15.5 billion and it had stockholder's equityof dlrs 900 million. The Standard Federal Bank branches will continue to operate under their own name.

[04] Kohl says as many as possible should join start of currency union

'The goal must be that many nations meet the stability criteria and participate in the currency union from the beginning,' Kohl told a banking forum in Frankfurt.

Kohl, credited as a driving force behind the goal of European political and monetary integration, warned nations faced more work in order to make the union, scheduled to be launched on January 1, 1999, be a lasting success.

'Today it is important to map out the patch for achieving this,' Kohl said, stressing the 'criteria set in the Maastricht Treaty must be adhered to, in the long term as well.'

This meant the so-called stability pact, German finance minister Theo Waigel's brainchild establishing automatic sanctions to ensure lasting fiscal austerity, must be adopted.

In a text of a speech given at the Frankfurt banking congress, Kohl said he believes it is possible to meet the criteria for Europe's planned currency union so that the final stage of European economic and monetary union will start on time Jan. 1, 1999.

[05] SEC sues , alleging it concealed bribes

In a lawsuit filed in federal court here, the SEC weighed into a case that is now known as one of Italy's biggest financial scandals, in which allegations of rampant misconduct led to the 1993 suicide of a top former Montedison executive. The debacle nearly sank the Milan-based chemical and agroindustrial giant, Italy's second-largest company.

In its case, the SEC accuses the company of fraudulently falsifying its U.S. regulatory filings from 1988 through 1993 in 'extensive and long-term efforts to conceal hundreds of millions of dollars of payments that, among other things, were used to bribe politicians in Italy and other persons.' The U.S. filings were required because Montedison stock trades as an American depositary receipt on the New York Stock Exchange.

'Our issue is not the fact that it was bribery,' said Paul Gerlach, an associate director in the SEC's enforcement division. 'Our issue is the fact these people materially misstated their financial position.'

It's unusual but not unprecedented for the SEC to go after a foreign company. 'While the commission encourages foreign issuers to participate in U.S. markets,' Mr. Gerlach said, 'they're going to be held to the same reporting, books-and-records, and disclosure requirements as U.S. companies.'

Montedison, which is contesting the case, said yesterday that the charges are based on information the company itself provided and date from a period under different management before Montedison was restructured.

The SEC complaint details two examples of what it says was fraudulent conduct at Montedison, formerly the main operating unit of Ferruzzi Finanziaria. In one, the SEC says the company accounted for numerous bribes that had been paid over a period of years by disguising them as a $272 million loan. For the fiscal year that ended in December 1992, Montedison declared that the loan was uncollectible and should be written off as a loss, the SEC complaint says. In the other example, the company fraudulently overstated real-estate values to disguise 'numerous bribes on the company's books and records from at least 1990 through 1992,' resulting in a separate write-down of about $126 million, the complaint says.

This conduct, the SEC says, continued undetected because of serious deficiencies in internal financial controls at Montedison. The controls were so deficient, the complaint says, 'that, according to Montedison, neither the company itself, nor its auditors, have been able to reconstruct precisely what occurred and who was responsible.'

Ferruzzi handed over operational control of Montedison to a group of creditor banks during the summer of 1993 and the company has since restructured its operations. Former senior executives of Montedison told Italian courts that massive kickbacks were paid to politicians and others during the battle over ownership of Enimont, a now-defunct petrochemicals joint venture with a state energy holding company called Ente Nazionale Idrocarburi. Raul Gardini, Montedison's former managing director, killed himself in July 1993 amid the widening scandal.

The SEC complaint asks the court to find that the company violated securities laws, to enjoin it from future violations, and assess unspecified civil penalties.

[06] Demand picks up for U.K. manufactured goods

According to the CBI's latest monthly industrial trends survey, 24% of companies polled said their order books were above normal in November, while the same percentage said order books were below normal.

The overall balance of zero, the CBI said, was a marked improvement from a negative balance of 9% both in October and September, and was the highest level recorded since last August.

'The improvement in demand in November is a good result compared with previous surveys, but is from a low base,' said Sudhir Junankar, the CBI's associate director of economic analysis.

Another bright spot for manufacturers came from dwindling inventories, or stocks. In November, 5% of companies said their stocks were inadequate, while 20% said stocks were still too high. The positive balance of 15% was below the 18% posted in October.

The improving outlook for the manufacturing sector had a slight weakening effect on U.K.

Manufacturing has substantially lagged the service sector in Britain's recent economic recovery.

And according to the CBI's survey, export order books suggest that lag persists somewhat. In November, export books showed a negative 5% balance, compared with negative balances of 7% in October and 11% in September.

Junankar said export demand was still 'sluggish,' but added that 'the slight improvement this month is surprising given the recent strengthening of sterling.' Junankar downplayed emerging inflation pressures in the manufacturing sector. According to the CBI survey, a positive balance of 8% expect domestic prices of ordered goods to rise over the next four months, compared to 7% in October and none in September.

'The pick-up in prices is a warning signal, but expectations indicated in this survey are much lower than a year ago,' he said. 'But expectations of manufacturers to achieve pressures continue to hamper the ability of manufacturers to achieve price rises in their home market.'

[07] German producer and import prices gain in October

Import prices, meanwhile, rose 0.6% from the previous month and 1.6% on the year. Export prices gained 0.2% on the month but were flat on the year.

Despite the monthly price gains, economists generally said they didn't believe there was any real threat of inflation heating up or of a rate rise in the near future. The primary reason for that reasoning was that the increases were linked to higher oil prices, and those haven't yet filtered down to the consumer.

Deutsche Bundesbank directorate member Edgar Meister said he's 'very satisfied with the development in inflation' in Germany and noted that the current rate of inflation is well within the bank's concept of price stability. Speaking to journalists on the fringes of a banking conference in Frankfurt, Meister said, 'We just have to be careful that the trend doesn't reverse.'

However, he observed that there is currently 'no great danger' to inflation from recent rises in commodity prices, especially crude oil and petroleum products.

Oil price rises accounted for almost all of the increase in Germany's import prices.

In contrast to the producer and import price figures, however, the state of Baden-Wuerttemberg kicked off the November round of consumer inflation reports with a 0.1% decline in prices, leaving its year-on-year inflation rate at 1.3%.

Meister remarked that the current level of consumer inflation in Germany, which stood at 1.5% in October, is well within the 1.5%-2.0% range the Bundesbank has traditionally tolerated in the past.

Separately, Meister said it's 'probable' that the flotation of Deutsche Telekom shares this week may yet have a net dampening influence on M3 money supply by the year-end, despite temporarily boosting M3 in October.

Meister didn't elaborate on how that could happen, but independent analysts have noted that Telekom's plans to use the flotation proceeds to pay off debts may depress net domestic bank credit to the private sector, which classically acts as an expansive factor on M3.

[08] to reorganise its businesses

The new business areas will be Telephones & Terminals, Mobile Systems and Infocom Systems.

'In addition to our world leading position in mobile systems and telephones, we are now creating and combining the necessary resources to become a leading supplier of network systems and products for multimedia communications,' said Ericsson president Lars Ramqvist.

[09] Skanska profit jumps 68%, bolstered by one-time gain

But the company warned that there was little sign of the Swedish construction market improving.

Pretax profit in the nine months rose to 3.44 billion kronor ($521 million). Skanska said it expects pretax profit for the year to exceed 3.5 billion kronor, well above the 2.57 billion kronor it reported for 1995. reached in 1995.

The nine-month figure included a 1.76 billion kronor gain, primarily from the sale of Skanska's entire stake in hydroelectric power and timber company Graninge in the first half.

Skanska said the Swedish housing construction market, although showing signs of picking up in the first half of 1996, remained slow. 'The downturn in the Swedish construction market, especially related to housing construction, bottomed out last year,' Skanska said. 'On the whole, the trend of construction investments therefore does not point toward any upturn during 1996, compared to the previous year,' the company added.

Order bookings in Skanska's international construction operations in the period rose 31.3% to 14.67 billion kronor. This was helped in particular by the U.S. market., the company said.

'Growth was especially strong in Skanska's American operation and this was the main factor behind the increase.'

'In Russia, project demand is now higher following the presidential election,' Skanska said.

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

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