European Business News (EBN), 97-01-03

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

Page last updatedJanuary 3 1800 CET

CONTENTS

[01] Airbus to shed its partnership status

[02] German Industrial output rises 1.6%

[03] New members nominated to Bank Of France council

[04] Spain leaves benchmark rate at 6.25%

[05] Creditanstalt employees embrace privatisation

[06] Repsol buys $340m Pluspetrol stake

[07] Italy budget deficit overshoots target

[01] Airbus to shed its partnership status

Airbus is currently a 'Groupement d'Interet Economique', a French legal entity which makes no profits or losses in its own right. Instead these go to four partners who make decisions by consensus.Critics had long maintained that this cumbersome arrangement shackled any challenge the plane mker might make on its swift footed American rivals.

Airbus said a memorandum of understanding will be signed within the next few days, but it declined to provide any details on the proposed agreement. The compromise is expected to try to put the aircraft consortium's assembly lines and research centers under the Airbus structure whereas production facilities would remain under their current companies' control.

Airbus is also expected to push forward the date for the change in status to a corporation to 1998 from 1999 in the wake of the merger announcement by the U.S.'s Boeing Co. and McDonnell Douglas Corp. in December. The U.S. merger will make Boeing and Airbus the world's only manufacturers of large passenger aircraft. Airbus is currently a consortium comprised of British Aerospace, Daimler-Benz of Germany, the parent of Airbus partner Daimler- Benz Aerospace, France's Aerospatiale and Construcciones Aeronauticas of Spain.

[02] German Industrial output rises 1.6%

But the Economics Ministry said that on a year-on-year basis, not adjusted for seasonal influences, it dropped 1.7% from November 1995. The figures put the economy on track to meet the modest 1996 economic growth forecasts ahead of a possible dip in winter output due to the recent cold snap.

However, the data are still designated as preliminary and could be adjusted further. The ministry offered no elaboration on the reasons for the gains, drops or revisions.

Separately, preliminary data released by the Federal Statistics Office show that Germany's external trade position improved to 11.1 billion Deutsche marks from 8.3 billion marks in September, surpassing expectations for a more modest rise to around 8.5 billion marks.

Likewise, the current account deficit shrank to 1.3 billion marks from 1.6 billion in September. Analysts had expected a deficit of around 3.5 billion marks. The trade surplus was also up from 7.8 billion marks a year earlier, while the current account account deficit was considerably smaller than the 4.8 billion marks posted in October 1995.

On a cumulative basis, Germany's trade surplus in the first 10 months of 1996 totaled 80.2 billion marks, up from 69.0 billion marks in the corresponding period in 1995. Exports were up 4.7% at 648.0 billion marks while imports were up 3.2% at 567.9 billion marks.

The strength of the figures, on a month to month and year-on-year basis, suggest the German economy is in reasonable health and on course to meet 1997's EMU targets.

[03] New members nominated to Bank Of France council

The two appointees will replace Jean Boissonnat and Bruno de Maulde, both of whose terms expire Monday.

Guillen is reputed to be a franc 'dove,' or in favour of a weaker franc. However, in a recent interview with Dow Jones News Services, he denied that assessment categorically.

Bernard has not made any strong pronouncements one way or the other on the franc, but is close to President Jacques Chirac and would be expected to follow his lead.

Boissonnat and de Maulde were part of a six-member majority that had supported the 'strong franc' policy espoused by Bank of France Governor Jean-Claude Trichet.

[04] Spain leaves benchmark rate at 6.25%

The central bank satisfied 100% of bids, allocating around 4.447 trillion pesetas on bids of around 4.447 trillion pesetas. Of the amount allotted Friday, around 4.447 trillion pesetas were awarded at the lowest accepted yield. There were no other bids not accepted.

The tender coincided with the expiry of around 4.035 trillion pesetas in repurchase agreements, and represents a net injection of around 412 billion pesetas in liquidity.

Payment is due January 7, and the repurchase agreements will expire in 10 days.

The central bank last altered its key rate December 13, cutting it to 6.25% from 6.75%. Prior to that the Bank of Spain lowered its key rate October 3, easing it to 6.75% from 7.25%.

The benchmark, or key, rate is Spain's main monetary policy instrument. It is determined by the central bank's advances on liquidity to the banking system through securities repurchase tenders held every seven-to-13 days.

[05] Creditanstalt employees embrace privatisation

The offer is dependent on the state selling its stake in Creditanstalt to the consortium led by EA Generali AG or via a public offering.

The union said the goal of having the bank's employees buy 500 million schillings ($45.8 million) of its shares if a sale takes place appears to have been reached. It added it expects the number of employees willing to buy shares to grow as people return from their Christmas and New Year holidays.

The union announced its plan two weeks ago, saying it was against the sale of the state's 70% voting stake in Creditanstalt to Bank Austria.

Bank Austria, the consortium led by EA Generali, and a private businessman, former Billa owner Karl Wlaschek, have submitted bids for the state's stake in Creditanstalt. The union said it has written a letter to Finance Minister Viktor Klima, asking him to take the employees' 500-million- schilling offer into consideration when he decides how to dispose of the stake.

Bank Austria has bid 16.7 billion schillings and the EA Generali consortium 13.8 billion schillings for the stake. The amount of Mr. Wlaschek's offer hasn't been revealed, but the Austrian press has reported it totals 12 billion schillings to 15 billion schillings.

Besides EA Generali, which is a subsidiary of Italian insurer Assicurazioni Generali SpA, the bidding consortium includes Austrian bank Die Erste Oesterreichische Spar-Casse Bank AG, Belgian bank Bacob, Germany's Commerzbank AG, and Italy's Banca Commerciale Italiano SpA and Mediobanca.

Mr. Klima, who has said repeatedly he is bound by law to accept the highest offer, said last Friday the contenders could improve their bids until January 10.

[06] Repsol buys $340m Pluspetrol stake

Astra, 37.7%-owned and managed by Repsol, paid $340 million in the operation.

Repsol said its purchase of the Pluspetrol stake is in line with the Spanish company's strategy for gas and electricity production in Argentina. Argentina is also a favourable platform for Repsol to expand into other areas of Latin America, Repsol said.

Pluspetrol's activities are centred on the exploration and production of gas and petroleum, and it has a 60% participation in the Ramos gas field in northwestern Argentina.

[07] Italy budget deficit overshoots target

In a note, the Treasury said December's deficit would be 3.2 trillion lire, compared to a surplus of 6.2 trillion lire in December, 1995. The figure is considerably higher than the government's initial target which was 123 trillion lire for 1996.

According to a report in Italian financial daily 'Il Sole 24 Ore', 'the Treasury said the overshooting of the 1996 deficit target was caused by cities drawing on Treasury accounts.' In 1995 the deficit was 130.3 trillion lire.

Separately, Italy's state sector debt rose 6% to 2,178 trillion lire at September 30, 1996, from 2,053 trillion lire at the same time one year before, according to figures released by the Bank of Italy.

Italy's total-debt-to-gross-domestic-product ratio stands at over 120% currently, and is twice the 60% maximum criteria set out by the Maastricht Treaty for monetary union.

While Italy has made notable strides in the last 12 months in moving inflation, interest rate levels, and deficit-to-GDP levels down towards Maastricht required levels, the government has conceded in the past that the total debt-to-GDP ratio won't be met.

State sector debt doesn't include debt of local governmental authorities that might be backed by the central government or of state pension institutions.

In 1997, the government is projecting that the deficit-to-GDP ration will be 3.1% or 3.2%, just above the Maastricht criteria of 3%.

The government has said it will take what measures are necessary to get the level to 3%.

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

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